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The Endogeneity of the Optimum Currency Area Criteria, Intra‐industry Trade, and EMU Enlargement
Author(s) -
Fidrmuc Jarko
Publication year - 2004
Publication title -
contemporary economic policy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.454
H-Index - 49
eISSN - 1465-7287
pISSN - 1074-3529
DOI - 10.1093/cep/byh001
Subject(s) - endogeneity , economics , international economics , currency , optimum currency area , convergence (economics) , business cycle , resizing , harmonization , monetary economics , international trade , macroeconomics , econometrics , european union , physics , acoustics
This article tests the endogeneity hypothesis of optimum currency area (OCA) criteria in a cross‐section of OECD countries in the 1990s. It argues that intraindustry trade induces convergence of business cycles, while no direct relation between business cycles and bilateral trade intensity is found. This finding confirms the OCA endogeneity hypothesis, but it underlines the role of trade specialization. Furthermore, the endogeneity of OCA criteria implies a comparable degree of business cycle harmonization of Central and Eastern European countries with the EU as for the current members in the medium run. (JEL F15 , F41 )